US Futures Edge Higher as Investors Shift Focus to Earnings Season

US equity futures edged higher Monday as investors brushed off recent worries about trade tensions and credit risks, turning their attention toward the upcoming wave of corporate earnings.

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Futures tied to the S&P 500 and Nasdaq 100 pointed to additional gains, extending last week’s positive momentum for both benchmarks. Tesla shares advanced in premarket trading ahead of its highly anticipated third-quarter earnings report on Wednesday, marking the first results from the so-called “Magnificent Seven” group of major tech players.

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Market sentiment brightened following efforts by President Donald Trump to ease trade friction with China. Washington and Beijing are set to resume talks this week in Malaysia, where Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng are expected to meet. The renewed dialogue signals a move by both nations to prevent escalating tensions into a broader trade war that could disrupt the global economy.

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At the same time, encouraging earnings from major Wall Street banks and several regional lenders have tempered fears surrounding the strength of the US credit market. According to JPMorgan Chase & Co. strategists, more positive surprises could emerge as the third-quarter reporting season unfolds, with earnings among the Magnificent Seven projected to grow about 15%, powered by sustained artificial intelligence investments.

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“The overall market tone is leaning positive as trade war concerns ease,” said Andrea Tueni, head of sales trading at Saxo Banque France. “Earnings have been better than expected so far, and the ongoing AI enthusiasm continues to drive momentum in the tech space.”

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Recent market volatility has prompted investors to rotate across sectors in both the US and Europe. Many have been taking profits in overcrowded trades while moving toward more defensive areas. Bloomberg’s Relative Rotation Graphs show that momentum for US technology stocks has cooled somewhat, even as optimism grows for health-care names.

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Treasuries and the US dollar held steady, while gold recovered slightly after Friday’s sharp selloff. Oil prices dipped, extending a three-week losing streak amid signs of softer demand.

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On the geopolitical front, Trump highlighted rare earth minerals, fentanyl, and soybeans as key sticking points with China ahead of this week’s trade discussions. His remarks followed renewed tariff threats specifically a potential 100% levy on Chinese imports after Beijing announced tighter control over rare earth exports. The back-and-forth rhetoric added to recent market swings, though many analysts believe investors are becoming desensitized to such threats.

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“The tariff talk has become a bit like the boy who cried wolf,” said Michael Field, an analyst at Morningstar Investment Service. “The more these threats repeat without real action, the less markets react. Investors took some profits earlier but are now feeling more confident as earnings season kicks off.”

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Across the Atlantic, European markets also moved higher. The Stoxx 600 index gained 0.6%, led by defense stocks after renewed conflict in Gaza over the weekend. Shares of Rheinmetall rose more than 4%, while Renk Group and Hensoldt both advanced over 5%. Submarine manufacturer TKMS surged in its Frankfurt debut following its spin-off from Thyssenkrupp, marking one of the day’s standout performances.

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In corporate news, French luxury group Kering jumped more than 4% after announcing the sale of its beauty division to L’Oréal, signaling a strategic refocus on its core fashion brands. Meanwhile, BNP Paribas tumbled after a New York jury ruled against the bank over past activities in Sudan, potentially exposing it to a substantial financial penalty.

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France’s financial markets also faced headwinds. French government bonds weakened alongside the CAC 40 index after S&P Global Ratings downgraded the country’s sovereign rating to A+ from AA-, citing concerns over fiscal discipline and budgetary uncertainty. The downgrade means France has now lost its double-A status with two of the three major credit agencies in just over a month a development that could force certain funds with strict investment mandates to offload French debt holdings.

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Overall, investor sentiment appears cautiously optimistic as earnings season gains pace. With trade rhetoric cooling and credit fears easing, markets are finding renewed footing though upcoming corporate results and geopolitical developments will likely dictate whether this rally can sustain its momentum in the weeks ahead.

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